In Washington State, small group health insurance premiums are often determined using a composite rating system that simplifies the pricing structure for employers. This system groups insured individuals into broad age categories, each with a standardized premium rate. Specifically, many insurers in Washington utilize two primary age bands:

  • Children (Ages 0-20): A single composite rate applies to all dependents within this age range.
  • Adults (Ages 21 and Over): A separate composite rate is assigned to all individuals aged 21 and above.

This approach contrasts with age-banded rating systems, where premiums vary for each individual based on specific age brackets, often in five-year increments. The composite rating method streamlines administration by providing uniform rates within the defined age groups, thereby reducing complexity for employers when calculating premiums.

The use of these two broad age categories is a common practice among insurers in Washington. For instance, some carriers adopt just two composite rates: one for individuals over 21 years old and another for those under 21.(support.gusto.com)

This system is designed to balance simplicity and fairness, ensuring that premium calculations are straightforward while still reflecting the general cost differences associated with age. By grouping individuals into these broad categories, insurers aim to provide a more predictable and manageable premium structure for small employers.

Calculating Premiums for Employees Covering Family Members

In Washington State, using a composite rating system with two age bands (0-20 for children and 21+ for adults), you would calculate the premium for an employee covering a spouse and two children as follows:

Step 1: Identify the Composite Rates

From the quote you received, there should be two fixed rates:

  • Adult Rate (21+): This applies to the employee and spouse.
  • Child Rate (0-20): This applies to each child, up to a maximum of three charged children per family.

Step 2: Apply the Rates

Assuming the provided composite rates are:

  • Adult Rate (21+): $500 per person
  • Child Rate (0-20): $250 per child

And the family consists of:

  • Employee (21+): Pays $500
  • Spouse (21+): Pays $500
  • Child 1 (0-20): Pays $250
  • Child 2 (0-20): Pays $250

Step 3: Sum the Costs

500 (Employee) + 500 (Spouse) + 250 (Child 1) + 250 (Child 2) = **$1,500 total premium**

Notes:

  • If the family had three or more children, only the first three children are charged, and additional children (fourth, fifth, etc.) are covered at no extra cost.
  • The employer contribution would determine the final amount the employee actually pays out-of-pocket.